Manulife John Hancock Partners with MIT Age Lab to Redefine Retirement
Maslow famously wrote that when the only tool you have is a hammer, you tend to see every problem as a nail. That bias makes people overly reliant on familiar tools or methods, failing to see other solutions or objective problems. So when you ask a retirement or benefits professional about the best ways for people to measure retirement preparedness, the almost universal answer is to focus solely on wealth and health.
Almost three years into CEO Wayne Park’s tenure, Manulife John Hancock decided to try to reframe the narrative, embarking on a five-year multimillion-dollar initiative with MIT’s AgeLab, creating the Retirement Preparedness Index.
The Index, based on over 1,000 interviews by MIT with individuals, lists eight domains that define how well a person is prepared for retirement, including:
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Transitioning when a loved one is lost
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New activities
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Community health and activity resources
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Re-equipping the home
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Social connections
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Caring for others or the resources need to be cared for
The Index creates a score that varies by age and region, with income or finances not necessarily the most important factors. The average score is 60, with those who have an advisor much higher.
As people live and work longer, the “retirement” industry must adjust just as retirement plan advisors have had to move beyond the Triple Fs, wealth advisors beyond portfolio construction and asset managers beyond securities selection. You cannot simply put a monetary number on how well people are prepared for retirement any longer.
“Investment products need to evolve as well,” said Park. “Longevity is forcing people to look for more alpha, which may be found through private investments, with Social Security and retirement income foundational.” Park also cited the need for greater personalization, which might be driven in part by the Preparedness Index.
“We have an accumulation system currently,” said Park, which is why Manulife, a global insurance, retirement and investment company with thousands of actuaries, has decided to invest and partner with MIT and others as part of a greater $350 million five-year commitment to a Global Longevity Institute.
“This Index can be a differentiator for advisors and might create more engagement,” he said.
The relatively slow adoption of retirement income in DC plans is not due to a lack of need, nor is transferability the biggest roadblock. When current education and marketing efforts to advisors, plan sponsors and participants fails, the DC retirement income industry doubles down, speaking louder, resorting to “mansplaining.” Results are predictable.
The DC industry is at a major crossroad. Just as 401(k) plans evolved from a supplement savings plan to one of the three legs of the retirement stool, along with Social Security and pension plans, it now needs to help people replace income in retirement to create a synthetic DB plan as access to pension plans fades.
While DC plans with almost 100 million participants and over $13 trillion may seem attractive, record keepers and advisors that focus solely on what has become commoditized plan-level services have and will struggle to survive. The challenge is how to engage relatively unsophisticated participants with limited assets chaperoned by plan sponsors with little to no experience and training, concerned primarily about liability, work and costs.
Rather than just creating a financial plan, figuring out the appropriate annuity or creating a personal retirement income plan which takes resources and time that only the wealthy can afford, RPAs should be asking different, more relevant questions that may result in greater engagement like:
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What are you going to do with the time you spent working?
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How are you going to replace those social connections?
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Is your home properly equipped?
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Who will care for you if you become disabled?
AI that can personalize plans and tools like the Retirement Preparedness Index are very promising as are advisor managed accounts as a platform to deliver advice at scale.